Zhou Bajun writes that the government should be prepared to use its massive reserves as well as think outside the box to tackle important livelihood issues

Traditionally, Hong Kong society was not particularly class-conscious because many locals worked for other people and ran their own businesses at the same time. This resulted in the economy being mostly made up of small- and medium-sized enterprises (SMEs). It also provided people with a way to climb up the social ladder. This scenario, however, has changed with the city's slow structural transition from a service-based to a knowledge-based economy and the widening income gap. Today, apart from the characteristic of local enterprises remaining predominantly SMEs, the number of people who work for other people while running their own businesses has been dwindling. This has not only affected upward social mobility but also heightened class divisions in society.

Hong Kong is currently facing the challenges posed by worsening political confrontations as well as more class divisions. Political tensions are most evident in the fight between separatist forces - known as "radical localism" or "pro-independence" advocates - and pro-establishment forces. Class confrontations, on the other hand, are centered on three outstanding livelihood issues that pit employees and their families against employers. These key issues are standard working hours' legislation, abolishing the "offset" practice by employers in their half of the Mandatory Provident Fund (MPF) contributions, and establishing a universal retirement protection system.

Handling these contentious issues is a very difficult challenge because the pro-establishment forces must remain united in their fight against separatism, yet they are still sharply divided over these three issues. This is because employers are predominantly pro-establishment.

Also making it a difficult challenge is that the SAR government's stance is not consistent on these three major issues. On standard working hours legislation and abolishing the "offset" mechanism of the MPF scheme, the government leans more to the position of employees than employers. But on establishing a universal retirement protection system, it has a lot of reservations - as do employers. The government fears the system will place too great a burden on the public coffers while employers are worried that the government will raise taxes. These livelihood issues must be tackled soon or achieving social harmony in Hong Kong will become impossible.

So far the SAR government has been playing the role of a mediator between the two sides over standard working hours legislation and doing away with the MPF "offset" mechanism. The difficulty with these two issues is that neither the labor nor employer side has offered solutions for businesses and employees facing different employment conditions. This is why they have failed to agree on anything and are in desperate need of new ideas.

New ideas must cover three aspects. One is a detailed approach. In today's Hong Kong it is a foregone conclusion that most, if not all, SMEs simply cannot afford to commit to standard working hours, give up the "offset" mechanism and pay more tax to support a universal retirement protection system - all at once. This is why the solution to each issue must be industry-specific and job-specific.

Another aspect is that the share of responsibilities in addressing these livelihood issues must be in accordance with the size of an enterprise and with the different salaries of employees.

It was reported recently that the government may propose a "cut-off line" to stop the "offset" mechanism with employment contracts signed beyond a certain time. Also under consideration is lowering the calculation of long-service payment and severance payment in proportion to salaries. It was not a complete surprise that both sides during negotiations responded negatively to the government "proposal" because it lacked specific details.

To be fair, the government "proposal" is not wrong in principle, but it could have been more specific. While drawing a "cut-off date" it should treat enterprises of different sizes and employees of different salaries differently. To make it work the new rule must take into account not just the number of employees but also the amount of profit tax each enterprise pays the government as the median of its employees' annual salaries. The new "proposal" must abolish the "offset" mechanism beyond a "cut-off date". This can be adjusted to make it easier for different employers so they will not be "driven out of business".

This brings us to the third aspect: The government has to advocate solutions to these key livelihood issues no matter how difficult it would be to do so. Be it setting up a "purpose fund" to help SMEs tide over initial problems or bailing out failing employers if necessary, the government should be prepared to use its massive reserves.

(HK Edition 01/05/2017 page10)